July 10, 2015 -- originally published by teleSUR English, submitted to Links International Journal of Socialist Renewal by the
author -- The main point of the summit of leaders from Brazil, Russia, India, China
and South Africa this week was host Vladimir Putin’s demonstration of economic
autonomy, given how much Western sanctions and low oil prices keep biting
Russia. In part this sense of autonomy comes from nominal progress made on finally
launching the bloc’s two new financial institutions.

But can these new banks address the
extraordinary challenges in world finance? For example, more than 60% of Greeks
voting in last Sunday’s referendum opposed the neoliberal dictates of Brussels-Berlin-Washington,
thus raising hopes across Southern Europe and among victims of “odious debt” everywhere.

Meanwhile, bubbly Shanghai and Shenzhen stock
markets were crashing by $3 trillion from peak levels in just 17 days, a
world-historic meltdown, at a time Chinese housing prices were also down 20%
over the prior year. Beijing’s emergency bail-out measures represent vast
subsidies to financiers, just like those used in Washington, London, Brussels
and Tokyo since 2007.

Change is urgently needed yet the BRICS’
finance bureaucrats – especially two leading appointees from South Africa – won’t
deviate from orthodoxy. Ongoing financial turbulence should offer a gap for the
$100 billion Contingent Reserve Arrangement (CRA), which is anticipated to open its doors next month. However, it carries not only a
strange name that even many insider experts often get wrong, but is dollar-denominated
and structurally hard-wired to support the International Monetary Fund (IMF).

To illustrate, according to CRA rules agreed at last year’s BRICS Fortaleza summit, after 30% of a country’s quota
is borrowed – based on double the amount of its own contributions (China at $41
billion, and Brazil, Russia and India at $18 billion each, and South Africa at
$5 billion) – then the borrower must next sign a neoliberal IMF agreement.

For South Africa this could prove painful in the
period ahead, after Pretoria finds itself borrowing from the CRA to repay the
country’s soaring foreign debt. Inheriting $25 billion in apartheid odious debt
in 1994, Nelson Mandela’s government worked diligently to repay. But over the
past decade, outflows of profits, dividends and interest soared as the largest Johannesburg-based
firms (Anglo American, DeBeers, etc) shifted their financial headquarters to
London.

The foreign debt ballooned to its present
$145 billion, the same level compared to the size of the economy that was hit
thirty years ago when PW Botha’s apartheid regime declared a default. To repay
short-term debt in a crisis would soon exhaust the $3 billion Pretoria is
permitted to immediately access from the CRA, and then the IMF will march in.

New Development Bank to take over World Bank’s nastiest projects

Sadly, even with Greece’s new mandate, there
appears no hope for bucking the IMF and European bankers on debt repayment by
finding a new bail-out partner in Russia this week. Early rumours that Moscow would invite Athens to join the BRICS New Development Bank
(NDB) proved cruelly deceptive.

Once launched next April, the NDB could well
fund specific projects in other non-BRICS countries, even Greece if profits there
ensure repayment – such as its controversial Chinese port privatisation.
However, these are likely to be the sorts of pro-corporate infrastructure deals
that even the World Bank finds increasingly difficult to support due to sustained
protest against community displacement and climate change, e.g. land grabs,
mega-dams and coal-fired power plants.

At the “BRICS-Civil” conference in Moscow
last week, the Delhi-based Vasudha Foundation’s Srinivas Krishnaswamy told the BRICS Post
that the NDB should be considered “in the light of a new World Bank Energy
Strategy which restricted funding of coal projects for developing economies.
This was opposed by India, South Africa and other countries dependent on coal
to satisfy their energy requirement.”

The BRICS banks will thus ‘complement’ the Bretton
Woods Institutions, thanks to a self-mandate dating to early 2014. As Brazil’s finance
ministry reminded last week, the CRA “will contribute to promoting international
financial stability, as it will complement the current global network of
financial protection. It will also reinforce the world’s economic and financial
agents’ trust.”

But shouldn’t we question trust in the world’s top financial "agents"? Two examples
from South Africa, appointed to the top tier of the NDB last Tuesday, remind us
why.

Karl Marx prefacedDas Kapital with a concern
that “Individuals are dealt with here only in so far as they are the
personifications of economic categories, the bearers of particular
class-relations and interest.” Biographies sometimes perform a useful exercise,
if we want to understand why an institution in the making will not in any way "threaten" the hegemony of Washington’s financial agents.

Pretoria’s neoliberal appointees

Relegitimisation of world financial
imperialism is explicitly reflected in Pretoria’s two new appointees to NDB leadership:

* NDB vice president Leslie Maasdorp was the
main privatiser of South Africa’s state assets and also worked in the local leadership
of Bank of America and Barclays – both charged in recent weeks with currency manipulation worth
billions of dollars.

* NDB board director Tito Mboweni, who in
2001 was Euromoney’s"Central Bank Governor of the Year", regularly
bragged of learning from the US Federal Reserve’s notorious free-marketeer and financial-liberaliser, Alan Greenspan. From
1999-2009, Mboweni was the most conservative central banker in modern South African history. He not
only loosened exchange controls dozens of times, but as a result then had to push
interest rates to painful highs while
local bank profits soared to among the world’s highest rates.

The two South Africans deployed to the NDB have
long enjoyed leadership and key advisory roles at the Johannesburg office of Goldman
Sachs, the New York investment bank partly responsible for the 2007-09 global financial meltdown
thanks to rampantly illegal lending practices. Its managers first got bail-outs
and then faced multi-billion dollar fines but were spared criminal prosecution thanks
to carefully cultivated revolving-door relationships in Washington, Pretoria and many other capitals.

Goldman’s lead strategist Jim O’Neill even coined the "BRIC" meme in 2001 to argue that imperialism in the form of the G7
should incorporate the emerging powers. In South Africa, Goldman’s local chief
executive Colin Coleman regularly articulates a cringe-worthypro-government stance, for example, writing in the Financial Times last
year, “As one of the five BRICS, South Africa will play a decisive role in global
economic development in the coming decades.”

According to Maasdorp in an interview with Independent
Online this week, ‘decisive’ is actually ameliorative: “When it comes to
the design, engineering and financial packaging of new projects I suspect we
will work very closely with the Development Bank of Southern Africa, African
Development Bank, the World Bank and others. We will and should benefit
from the long years and decades of experience of these institutions.”

He added, “As international adviser of
Goldman Sachs from 2002, I played a leading role in expanding the reach of the
firm into new market segments including the public sector and the rest of the
continent.” As translated by Rolling Stone’s Matt Taibi, “The world’s most powerful investment
bank is a great vampire squid wrapped around the face of humanity, relentlessly
jamming its blood funnel into anything that smells like money.”

Maasdorp
also witnessed the highest-profile corruption in African infrastructure
finance, not only because his South African big business allies are considered
to be the "world champs" of money-laundering, bribery
and corruption, procurement fraud, asset misappropriation and cybercrime.“I served for example as chairman of
TransCaledon Tunnel Authority (TCTA), which is a state-owned enterprise with a
mandate to finance and implement bulk raw water infrastructure projects in
South Africa, and played an oversight role from a governance perspective for
seven years of large infrastructure projects.”

TCTA
pipes run from Africa’s highest dams in Lesotho to Johannesburg, which led to
what was the world’s most infamous case of construction company
bribery in World Bank lending history. More than $2 million flowed from a "dirty
dozen" multinational corporations to the Swiss accounts of the leading Lesotho
dam official, Masupha Sole, who served 9 years in jail but was then, to
everyone’s astonishment, reinstated thanks to his political influence.

Although
the World Bank debarred some of the most corrupt companies, thus catalysing the
bankruptcy of Canada’s once formidable civil engineering firm Acres
International, nothing was done to punish the firms by Pretoria officials,
including Maasdorp at the TCTA. Several then reappeared in a construction
collusion case involving white-elephant World Cup 2010
stadiums and other mega-projects in which billions of dollars were ripped off.

BRICS
has been rife with mega-project corruption, and as just one example, the World
Bank last year debarred the China Three Gorges
Corporation’s subsidiary building dams in Africa. The World Bank "Vice
President – Integrity" (sic) responsible,
Leonard McCarthy, was himself declared by the finest South African
newspaper editor, Ferial Haffajee, to have “ruined our criminal justice system”
because of his own political corruption when serving as lead prosecutor of
current South Africa's President Jacob Zuma. In this cesspool, international
infrastructure financing is bound up with cronyism; South Africans are well
placed to help the money flow.

Mboweni had a central role in the IMF’s 1993 financing
deal, one of South Africa’s historic capitulations to neoliberalism. As Mboweni
explained in a 2004 speech, he knew that “the apartheid government was trying to
lock us into an IMF structural adjustment programme via the back door, thereby
tying the hands of the future democratic government… We did not sell out!”

He did indeed: the $850 million loan came with
severe economic policy and even personnel conditions attached. Former ANC minister of intelligence Ronnie Kasrils in 2013 termed this deal “the fatal turning point. I will call it our Faustian moment
when we became entrapped – some today crying out that we ‘sold our people down
the river’.”

As South African Reserve Bank governor,
Mboweni braved similar controversy to the IMF’s repeated applause, especially
with extreme interest rate increases. As he left, the only major economy with
higher rates was Russia’s, and shortly after that, the only one among South Africa’s trading partners
where capital cost more was Greece.

Keeping inflation low – since banks hate the
devaluation of their main asset, money – was the main reason for Mboweni’s
sado-monetarism. Yet self-interestedly, on the eve of the 2008 world financial
meltdown he rewarded himself a 28% personal pay raise at a time
his institution had declared a 6% maximum inflation target.

Remarked business ezine Moneyweb (normally fans of neoliberalism), “The high-living
governor already has a reputation for excessive ego, after attempting to censor
what pictures of him are released into the public domain.” The reference is to
Mboweni banning photographers from the Reserve Bank because
they were “taking pictures when I was wiping off my sweat.”

Is another BRICS possible?

Ironically, at the time Durban hosted the
BRICS summit in early 2013, Mboweni used a speech to regional business elites
to attack the NDB as “very costly. I would rather take that money and build the
Coega Petro SA oil refinery here in Port Elizabeth.” Mboweni also chairs a
local oil company.

Will men like Maasdorp and Mboweni fight the
poverty, ecological destruction and climate change, privatisation and
corruption, illicit financial flows and Resource Cursing associated with current
global lending, or will they amplify
these features?

- the sort of default on unpayable,
unjustifiable debt that Argentina managed to accomplish in 2002;

- exchange controls that countries like
Malaysia (in 1998) and Venezuela (in 2003) imposed on their elites (as did
Greece last week);

- new regional currency arrangements such Ecuador’s
proposed sucre; and

- socially and ecologically conscious
financing strategies tied to compatible trade (like ALBA) such as were once
proposed and seed-funded by the late Venezuelan leader Hugo Chavez in the
stillborn Bank of the South.

Given NDB and CRA positioning and personnel, it
is foolish and perhaps dangerous to invest hope in the BRICS’ fake alternative.

[Patrick Bond’s new book, co-edited with Brazilian political economist Ana Garcia, is BRICS: An anti-capitalist critique,
published this month by Pluto, Haymarket, Aakar and Jacana.]